Edtech sector sees 48 per cent fall in funding in 2023

Number of funding rounds so far this year witnessed 77% and 82% decrease as compared to 2022 and 2021, respectively

Image used for representational purpose only. (Express IIlustration)

BENGALURU:  Two years ago, the Indian edtech sector looked promising as it raised over $4.7 billion in funding, but from the mid of 2022, the sector slowly started facing various challenges including funding winter and decreasing demand for online education. 

In 2023, till the first week of August, edtech companies have managed to raise only $971 million, a 50% decline compared to the same period in 2021, and 48% drop compared to 2022. As per market intelligence firm Tracxn’s new report, the number of funding rounds so far this year saw 77% and 82% decrease compared to 2022 and 2021, respectively. In the past few quarters, from Byju’s to Unacademy, Teachmint, Skill-Lync and Vedantu, many edtech firms have laid off hundreds of employees. Byju’s alone has fired over 3,500 employees.

Early-stage rounds witnessed funding of $75.7 million (from January 1 to August 7, 2023), an 88% drop from $618 million raised in the same period in 2022 and an 82% drop compared to $414 million raised in 2021. In the case of late-stage rounds, edtech companies managed to raise only $879 million in funding, which is a decrease of 23% compared to $1.14 billion raised in the same period in 2022 and a drop of 39% compared to $1.44 billion raised in 2021.

Only one over $100 million funding round has happened so far in 2023, compared to four rounds in 2022. Byju’s managed to raise funds above $100 million in the first half of the year. Also, the company has raised a total of $700 million in multiple Series G rounds in Q2 of 2023. Experts attribute this drop in funding to various factors including a preference for offline education after Covid. Neha Singh, co-founder and CEO of Tracxn, said,

“Global edtech market has been facing challenges attributed to decreasing demand for online education, ongoing funding constraints, rising interest rates aimed at controlling inflation, and economic uncertainties.” “With government support, advancements in technologies such as AI, and the growing adoption of the internet in tier-2 and tier-3 cities, the sector holds the possibility of substantial growth in the near future,” she added.

Edtech funding

•  K-12 edtech start-ups raised $711 million in 2023 (till August 7, 2023), a drop of 45% and 56% compared to same period in 2022 and 2021
•  No new unicorns so far this year, as against two new unicorns in the same period last year
•  Edtech start-ups in Bengaluru have raised over $8 billion so far, followed by Mumbai ($2.5 billion) and Gurugram ($497 million)
•  In the past two years, We Founder Circle, Peak XV Partners and MMPL Trust, were most active investors in this space
•  Edtech start-ups raised $15.7 million through seed-stage rounds, a drop of 85% from $105 million raised in the same period in 2022